Business Directories

Tunisia expects IMF deal in May, sukuk in July

Tunis, April 2, 2013

Tunisia expects to sign a $1.7 billion loan deal with the International Monetary Fund next month after a delay due to the crisis that followed the killing of an opposition politician in February, its finance minister said on Monday.

"We have the last round of discussions. It will take place in the week from April 8 to 15 in Tunisia," Elyess Fakhfakh told Reuters, adding that he expected a deal to be reached in the "middle of May".

Last week, the IMF said it would send a team to Tunis between April 8 and 15 to discuss the loan.

Tunisia plunged into crisis on February 6 as the assassination of secular politician Chokri Belaid ignited the biggest street protests since the overthrow of strongman Zine al-Abidine Ben Ali two years ago. But a new government has now been formed and protests have died down.

Asked whether the IMF loan would be enough to cover Tunisia's financing needs, Fakhfakh stressed that the money would only be used in emergencies.

Speaking ahead of a meeting of Arab finance ministers and central bank governors in Dubai, he said Tunisia was also in talks to obtain a borrowing guarantee from the US Treasury, and in other discussions to obtain a guarantee for an issue of yen-denominated Samurai bonds, while it could count on budget support from the European Union and the World Bank. These sources should be enough without using the IMF money, he said.

SUKUK ISSUE

Fakhfakh said Tunisia planned to issue its first sovereign sukuk, or Islamic bond, in July to raise $700 million.

The government, led by moderate Islamists, is keen to develop Islamic finance, which was neglected for ideological reasons by Ben Ali's government. A Tunisian sukuk issue could potentially attract large amounts of Islamic funds from the wealthy Gulf.

Fakhfakh said the government was in the final stages of pushing through legislation that would allow a sukuk issue, and hoped parliament would approve the bill by the end of April or early May.

Authorities are still studying issues such as what assets will underly the sukuk and how the issue will be divided between the domestic and international markets, he added. "We think we'll be one third part for the internal and two-thirds for the external market."

The state budget deficit is expected to rise to around 5.9 per cent of gross domestic product this year from an estimated 5.1 to 5.3 per cent last year, Fakhfakh said.

He noted that inflation, at 6 per cent, was high last year, particularly since prices of basic consumer goods such as food rose around 8 to 9 per cent.

"Now we have a programme to control inflation because it affects a lot the citizens with low income," he said.

Measures being used by authorities to fight inflation include interest rates and limits on borrowing, efforts to curb smuggling across the border with Libya, and financial support to unemployed people, he said. – Reuters